HONG KONG SHOULD CAPITALISE ON ITS ROLE AS A LEADING EXAMPLE IN DECARBONISATION

By Jasper Hilkhuijsen, Senior East Asia Sustainable Development Manager; Senior East Asia Innovation Manager, Arup

The recent pre-COP28 ‘Race to Transition’ Asia event series has made it clear: Hong Kong is well positioned to lead in decarbonisation, yet significant work remains ahead.

Hong Kong boasts many enviable advantages, including its strong financial sector, widespread applications of advanced technology, high-quality infrastructure, and a supportive policy environment However, the city also faces many challenges in decarbonising its economy and society, such as a lack of public awareness, limited land and natural resources, and a dependence on imported energy and materials.

The following insights are largely drawn from the Hong Kong session of the series, which featured panel discussions on “Driving collective climate action across Asia” and “Scaling corporate transition towards a sustainable future”.

A quest for guidance

The global stocktake at COP28 revealed insufficient progress towards the climate goals set by the Paris Agreement, This necessitates adjustments to the Nationally Determined Contributions (NDCs) to get back on track

The Asia Pacific region, known for its rapid economic growth, is a major emitter accounting for half of the world’s carbon emissions. While multiple governments across the region have formulated climate action plans, they often lack the means and expertise to implement and, as mentioned, the plans might need to be revised to set more ambitious targets.

A quest for best practices and leadership can soon be anticipated, which will open an opportunity for Hong Kong to showcase itself as a regional, if not global, leading example in decarbonisation. Hong Kong must therefore dare to showcase what has been done so far and what is yet to come.

A supportive government is eminent

In October 2021, the Government promulgated Hong Kong’s Climate Action Plan 2050 which outlined major decarbonisation strategies as well as interim targets aimed at achieving carbon neutrality before 2050. While this plan has room for improvement as highlighted in our post-COP26 publication, it does outline the ambitions of the Government and sectors to focus on. The plan has increasingly become a catalyst for the public and private sectors to have discussions, seek collaboration and appoint responsibilities

The Government's commitment to collaboration is evidenced by CF Wong, the Commissioner for Climate Change in the Environment and Ecology Bureau, participating in the pre-COP28 event series and openly advocating for dialogue

A much-needed shift from CSR to ESG

Hong Kong’s financial regulators such as the Stock Exchange of Hong Kong are mandating climate risk disclosure for banks and listed companies. This is steering private companies from Corporate Social Responsibility (CSR), traditionally associated with profit making and occasional donations, to Environmental Social Governance (ESG), recognising a deeper responsibility in the decarbonisation effort

To cement its leading role, Hong Kong has launched several initiatives to promote ESG practices, such as the Green and Sustainable Finance Cross-Agency Steering Group, the Green Bond Grant Scheme, the Centre for Green and Sustainable Finance, and the ESG Knowledge Hub.

While these are much appreciated, Hong Kong could further improve by enhancing the collaboration across the Government, the private sector, civil society and regional partners. A first step could entail sharing ESG best practices to empower various stakeholders, including SMEs.

Companies need encouragement to go beyond compliance

Initially driven by compliance, ESG is evolving as companies are moving from mere reporting to tangible climate action and impact In addition, facilitated by the Government and the finance sector, private companies are increasingly aware of not only the physical risks related to climate change but also transitional risks. Companies that fail to transition to more sustainable and climate-ready business models will increasingly struggle to keep their businesses afloat.

Leading the charge in Hong Kong’s private sector are CLP in green energy transition, HSBC in sustainable financing and investment, Cathay Pacific in green fuel adoption, Esquel Group in the circular economy, and various startups that are actively enhancing energy efficiency and reducing carbon emissions in the fields of Green-Tech, Food-Tech, Prop-Tech and Fin-Tech

Guidance of capital to low-carbon transition

Drawing upon its history as a global finance centre, proximity to Mainland China and extensive network, Hong Kong possesses the expertise to lead and shape global initiatives Hong Kong’s dedication to advancing green and sustainable finance positions it as a key player in the global transition to a low-carbon economy

The finance sector plays a crucial role in enhancing market efficiency to enable capital to flow where it’s most needed at a lower cost, a process especially important for funding decarbonisation projects. However, a major regional challenge is the limited availability of financially viable projects for investment.

To address this, emerging technologies must be better leveraged, so that more capital can flow to them. This will require adequate policy support as well as the creation of certain risk appetite pockets. The Hong Kong Green Building Council Climate Change Framework for the Built Environment serves as a holistic reference for the building sector to embrace decarbonisation and benchmark their carbon and energy performance. Such initiatives can further enable the finance sector to decide where capital is needed.

Innovation is a must for rapid and at scale decarbonisation

Hong Kong is advancing as a global hub for innovation and technology, supported by government initiatives such as InnoHK, the Innovation and Technology Fund and incubation programmes run by the Hong Kong Science Park and Cyberport, alongside numerous private sector efforts. This is reflected in Hong Kong’s 2023 ranking as second worldwide and first in Asia on the Emerging Ecosystems ranking In recent years, the city has seen a surge in green innovations, ranging from smart buildings and sustainable materials to local energy solutions

However, the city faces challenges in deploying these innovations due to the high costs and complexity of transforming infrastructures, limited land and resources, and low public engagement. Additionally, the lack of a comprehensive and consistent policy and regulatory framework causes uncertainties and risks for investors and innovators.

To overcome these, the Government should lead in developing a holistic and collaborative approach that incentivises stakeholder engagement, enhances public-private partnerships and fosters a culture of co-creation among citizens and communities

Green initiatives should apply to both old and new buildings

As elaborated in the Hong Kong Climate Action Plan 2050, buildings are a major focus for decarbonisation, accounting for around 90% of the city’s electricity consumption and contributing 60% to its carbon emissions. The plan outlines strategies and targets for decarbonising various aspects of buildings, such as electricity, cooling, lighting and appliances.

The city has also introduced its own green building rating system in 2010, Building Environmental Assessment Method (BEAM) Plus, which covers the assessment of new and existing buildings, interiors, and neighbourhoods Beyond passive energy saving strategies such as natural ventilation and lighting, Hong Kong encourages innovative green building technologies, such as smart meters, building information modelling, and district cooling systems

The challenge remains with upgrading energyinefficient existing buildings. Retrofitting could significantly reduce embodied carbon and save upfront and operational costs. However, fragmentated homeownership, lack of awareness and financial hurdles need to be addressed to ensure a just transition. A possible solution is providing incentives and support for building owners and occupants to conduct energy audits, install energy saving devices and embrace green practices

Public transit and walkability are key to decarbonising the transport sector

Hong Kong’s transport sector is also exemplary in decarbonisation. The city has a well-developed public transport network, covering over 90% of the daily passenger trips. It is implementing further measures to enhance its efficiency and environmental performance, such as rationalising bus routes, retrofitting emission reduction devices and introducing low-emission buses In addition, the city continues to encourage a shift to public transport and active travel, such as walking and cycling, through improved infrastructure and awareness campaigns

Hong Kong also has set an ambitious target to phase out conventional fuel private cars by 2035, and has introduced incentives and support for electric vehicle adoption, such as tax concessions, charging facilities and parking spaces. However, a challenge that remains is road congestion, especially during peak hours. This could be alleviated by implementing more traffic management measures such as electronic road pricing and congestion charging as is currently being tested

The main competitive advantage of Hong Kong is its people

What Hong Kong does not have in terms of natural resources, it certainly makes up with its people, especially when it comes to decarbonisation.

Jointly Hong Kong’s people possess the skills, knowledge, creativity, and resilience that have driven, and will continue to drive the city’s development and transformation They are diverse and dynamic, coming from different backgrounds, cultures, and professions, and contributing to various sectors, such as energy, transport, finance, health, and construction Hong Kong’s people also proved to be adaptable and collaborative, facing the challenges and opportunities of the changing world, and working together to find solutions and create impacts. They are passionate and responsible, caring about the well-being of the society and the environment, and support the vision of a low-carbon and liveable city.

Asia’s World City

If the city can keep the decarbonisation momentum, and if various stakeholders can step up their game by increasing the communication and collaboration on what is needed by whom and by when, Hong Kong will be able to not only achieve its own decarbonisation targets, but also emerge as a global leader in decarbonisation.

This leadership could spur business growth, drive innovation, generate jobs and improve Hong Kong’s reputation as Asia’s World City.

About Arup

Arup is a global collective of designers, consultants and experts dedicated to sustainable development, and to using imagination, technology and rigour to shape a better world As a firm, Arup has made a commitment to be a net zero organisation by 2030 and to contribute meaningfully to the UN Sustainable Development Goals

Jasper Hilkhuijsen

Senior East Asia Sustainable Development Manager | Senior East Asia Innovation Manager Arup